INVESTMENT STRATEGY FOR INDIA

The Investment Commission has observed that for sustaining growth at over 8% per annum will require an increase in investment levels in the economy from approximately 28% of GDP to about 32% of GDP. Over the next 5 years, this translates to a cumulative investment of about $ 1.5 trillion. The Commission has set itself the goal to increase the level of FDI from the existing level of about $ 5 billion to $ 15 billion by 2007-08.

The Investment Commission was set up by Ministry of Finance in December 2004 with the broad authority of the Government to engage, discuss with and invite domestic and foreign businesses to invest in India and to make the environment in India attractive for investors. Its report titled “Investment Strategy for India” was submitted in February this year.

Main Terms of Reference of Investment Commission were the following:-

a) The Commission to seek meetings and visit with industrial groups/houses in India and with large companies abroad, particularly in sectors where there is a dire need for investment but adequate investment has not flowed so far. The Commission to interact closely with the Boards of Directors of potential investing companies.

b) In respect of Indian investors, the Commission to address the issue of bridging the gap between “announcements” and “proposals” and also the gap between “proposals” and “project implementation”.

c) The Commission to endeavour to secure a certain level of investment every year and its progress to be reviewed at the end of every quarter.

d) The Commission to make recommendations to Government both on policy and procedures to facilitate greater FDI flows into India.

Resolution of Impediments

Commission studied 25 key sectors spanning Infrastructure, Manufacturing, Services, Natural Resources and the Knowledge Economy and interacted with industry bodies, associations, Ministries at the Centre and State level, business delegations and companies. Arising out of these interactions, the Commission has identified major impediments to investment and has also made a set of broad recommendations.

Investment Commission has observed that as a result of their extensive investor interactions, many representations on policy/procedures or other impediments were resolved through reference to Government. Of 115 sector specific recommendations, the concerned administrative Ministries have completed action on major part of these recommendations or in process of implementation in respect of 86 recommendations.

FDI Policy Rationalised

In February 2006, Government have also undertaken a major rationalization of the FDI policy and associated procedures to further improve the investment climate which, inter alia include, dispensing with the need of multiple approvals from Government and/or regulatory agencies that exist in certain sectors, extending the automatic route to more sectors, and allowing FDI in new sectors. The latest changes in the FDI policy were notified vide Press Note 4 (2006 Series) of the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry.

During March 2006, FDI inflows aggregating to US$ 1,244.1 million (Rs. 5,514.89 crores) were received as against US$ 275.0 million (Rs.1,202.73 crores) during March 2005, showing an increase of 352%.

Final figure of FDI received during the financial year 2005-2006 (from April 2005 to March 2006) show an inflow of US$ 5,548.3 million (Rs. 24,612.59 crores) compared to US$ 3,218.7 million (Rs. 14,652.75 crores) during the corresponding period in 2004-2005. This represents an increase of 72% in dollar terms.

Within this the cumulative FDI inflows from August 1991 till March 2006 aggregate US$ 38.90 billion (Rs. 1,61,410.93 crores). (PIB Features)